Deregulation is the key (KOR)

Dec 06,2018

The so-called Gwangju job model — whose development took nearly five years of workers’, employees’ and the government’s strenuous efforts — may finally be realized. Gwangju and the country’s top automaker, Hyundai Motor, reached a preliminary agreement to build a car assembly plant within the city. The first-year pay for workers will be around 35 million won ($31,489) a year, as Hyundai Motor first suggested. Its unionized employees threatened a walkout should the company agree to the pay, which is less than at other Hyundai factories.

A finished car factory can greatly help the regional economy. Not a single new car factory has been built in Korea over the last two decades. Korean carmakers preferred to build manufacturing bases outside of Korea due to high local wages despite weakening productivity and militant unions’ frequents strikes. The Gwangju model will likely draw interest from other regions. The Jeolla region would receive a boost with the addition of a factory in Gwangju after GM Korea’s Gunsan factory and a Hyundai Heavy Industries dockyard shut down.

Traditional industries are not the only place where jobs are being lost in Korea. Seo Seung-woo, whose Seoul National University research team was among the first to test a self-driving car on Korean roads, opened his business in Silicon Valley because of his frustrations with heavy regulation in Korea. His self-driving car safely ran around Seoul for 60,000 kilometers (37,282 miles), but he failed to get any financing to start his business. His self-driving pickup concept could also not get beyond the regulations that ban ride-sharing businesses in Korea.

Naver took its fintech business elsewhere through its Japanese unit Line. It set up a cryptocurrency exchange in Singapore and will also begin online lending in Japan. It will launch online brokerage and mobile banking service in the following years. SK Telecom launched its mobile health care service in China due to stringent regulations on telemedicine in Korea.

Three domestic wireless carriers have launched 5G commercial mobile services for the first time in the world. Their next-generation network enables speed 20 times faster than 4G LTE. Autonomous vehicles, artificial intelligence and internet of Things technologies can perform at their full capacity on 5G networks. Korea’s software and hardware applications cannot use this new infrastructure because of regulatory stumbling blocks. The new industries likewise cannot be developed if regulations stifle their growth. Without changes, Korea’s job crisis could become a fixture.